Finally, some good news for employers! On May 21, 2018 the U.S. Supreme Court issued a long-awaited decision answering the question of whether agreements with arbitration provisions that include mandatory class and collection action waivers are enforceable. In Epic Systems Corporation v. Lewis, the Court found that the waivers are indeed lawful, and arbitration agreements containing such waivers may be enforced. Thus, employers may not only require that employees pursue any claims they might have through arbitration, they may also prohibit them from arbitrating such claims together with other employees.

Employers have increasingly turned to arbitration provisions in recent years in response to the skyrocketing costs associated with traditional litigation. While some may debate whether or not there are any real cost savings associated with arbitration (it’s certainly not cheap), in many instances arbitration does results in a speedier and more efficient resolution of disputes, and at a lower cost. The savings associated with arbitration can quickly evaporate, however, when arbitration is conducted on a class or collective action basis involving several employees.

Plaintiffs’ attorneys absolutely love pursuing claims on a class action basis (where a defined group of employees is automatically included unless they opt out), or on a collective action basis (where employees affirmatively join in order to participate). Whether pursued through a lawsuit or an arbitration proceeding, group claims quickly generate huge legal fees and are far more profitable for plaintiffs’ lawyers than claims pursued on an individualized basis. And who is responsible for those fees if the plaintiffs are successful? You guessed it… the defendants. Combined with the fact that class and collective action lawsuits are difficult and cumbersome for the employer to defend against, employers have a strong incentive to pay up and be done with the matter, and that’s true even if it has done nothing wrong. For these reasons, there has been a growing trend among employers to not only require employees to arbitrate disputes, but to restrict them from doing so other than on an individual basis. Prior to the recent decision in Epic, however, there was uncertainty as to whether requiring employees to resolve their claims individually was lawful.

Specifically, in 2012 the National Labor Relations Board (NLRB) issued a decision that found class and collection action waivers violated the National Labor Relations Act (NLRA). The NLRA is a federal law that, among other things, guarantees the right of workers to engage in concerted activity for their collective benefit (for example, to unionize, or work together to improve working conditions). In its decision in D.R. Horton, Inc., the NLRB found that class and collection action waivers violated the NLRA by preventing workers from banding together through class or collective action lawsuits. The rationale of the D.R. Horton decision was subsequently adopted by certain federal appellate courts, and rejected by others, creating a split of authority that the Supreme Court was asked to resolve.

As I mentioned above, in Epic the High Court resolved the question in favor of upholding the validity of class and collective action waivers in arbitration agreement. In brief, the Court noted that the Federal Arbitration Act (FAA) strongly favors the arbitration of disputes, and requires courts “to respect and enforce the parties’ chosen arbitration procedures.” The FAA, however, has a “savings clause” that invalidates its application where doing so violates another federal law. The NLRB and the employee proponents of its position argued that the FAA intruded upon the NLRA by preventing employees from collectively pursuing claims against employers (i.e. as a “concerted activity”). The employers argued that a class action claim was not the equivalent of a concerted activity, and the Court agreed. The Court rejected the argument that there was any conflict between the NLRA and the FAA, finding that the NLRA “does not even hint at a wish to displace the Arbitration Act,” and that “the absence of any specific statutory discussion of arbitration or class actions is an important and telling clue that Congress has not displaced the Arbitration Act.”

This decision has important implications for a wide array of documents pertaining to drivers, employees and members of the riding public. Now is the time to review your company’s contracts (for example, driver agreements, salespersons agreements) and your terms and conditions (e.g. website terms, app terms) to check whether they require arbitration of disputes, and if so, whether they contain class and collective action waivers. For those documents that contain such provisions, this important decision provides welcome assurances that if tested in a court, such provisions will be upheld. As for those employers who do not presently have class and collective action waiver provisions in their agreements and terms, I recommend that you speak with your attorneys as soon as possible regarding whether updates to those agreements are in order.

Article by Lawrence I. Cohen

Laurence I. Cohen is a partner with Pike, Tuch & Cohen, LLP, a Bellmore, NY-based law firm.

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